History
The geoscientific study carried out in 1892 in central Asia by Russian Scientist, V. A. Obruchev marked the beginning of Mongolian geology. A few decades later, oil exploration in Mongolia begun with the classification of Mesozoic and Tertiary sediments, and the discovery of oil shale outcrops in the Gobi region. Around 1940, the Zuunbayan oilfield was identified in the East Gobi by Mongolian and Soviet geologists. At that time, the Zuunbayan and Tsagaan-Els oilfields reserves were estimated at 6.2 million tonnes. In 1950, construction of the country’s first ever refinery was completed and it started refining oil produced from the Zuunbayan field. Both fields yielded 586 thousand tonnes of oil until 1969, when the refinery and production ceased activities due to declined rates, a fire at the refinery and economic factors. Since then, Mongolian oil exploration and production activities were idle for over 20 years.
Resumption
The collapse of the Soviet Union in 1989 had far-reaching impacts for Mongolia, politically, economically and socially. A parliamentary democracy was put in place, the development of upstream petroleum operation recommenced, and the Petroleum Law of Mongolia and related regulations were put into effect in 1991. The government initiated the “Petroleum Programme” classifying prospective petroleum areas into contract blocks and releasing them for international bidding.
In 1993, the first Production Sharing Contract (PSC) was signed with SOCO from the USA and the first exploration well of 3,000 meters depth was drilled a year later. In 1997, well 19-3 on Block XIX was recorded as the country’s first free flowing oil well. Soon after, oil was exported from Mongolia by trucks to China to be refined.
Production Sharing Contracts
Petroleum exploration and production in Mongolia are performed solely under PSCs signed over each petroleum block between the investor and the Government of Mongolia. There is no national oil company (NOC) in Mongolia.
As of 2025, there are a total of 33 petroleum blocks. 4 of these blocks have advanced to production, while exploration is being conducted on 11 blocks. Mineral Resources and Petroleum Authority of Mongolia (MRPAM)’s Tender Round for new exploration licences commenced in late 2022 with a total of 14 blocks made available across the country with PSCs awarded for 3 of them in late 2024/early 2025.
Exploration, Production, Recent Discoveries
After the resumption of upstream petroleum activities in the early 1990s, circa 85 million barrels of oil have cumulatively been produced in Mongolia between 1996 and 2024.
Mongolia’s oil production steadily increased until 2015, reaching a daily production of ca. 24,000 barrels of oil. More than 90% of the country’s annual production has been solely from Blocks XIX and XXI in Tamsag basin in eastern Mongolia in recent years.
From 1993 to 2025, total 38,453 line km 2D seismic, 7,021 km² 3D seismic, gravity survey covering 272,890 km² area (incl. 11,000 km² FTG), 11,000 km² HRAM and 77,630 km² magnetic survey were conducted, and more than 1,800 wells have been drilled. Investments totaling 3.45 billion USD were made in petroleum exploration and exploitation in Mongolia by PSC contractors during the same period. Since 1990s, 70 were drilled as oil exploration/appraisal wells outside the 4 blocks that have advanced to production stage.
In addition to the 4 production blocks, oil discoveries or oil shows have been reported in 7 other blocks so far.
The ‘proved’ ultimate recovery (‘proved’ reserves plus cumulative production) for the 4 production PSC blocks was estimated at total 43.4 million tonnes (ca. 320 million barrels) of oil.
Export, Import, Refinery
Since there is no in-country refinery under operations, the produced oil is exported. 82 million barrels of oil have been exported to China between 1998 and 2024.
Likewise, the demand for refined oil products has been met nearly 100% by imports. Consumption has been increasing nearly every year until it dropped slightly in 2014 and 2015 reflecting the country’s economic downturn during these years. It was back on upward trend, with slight decreases during Covid-19 pandemic years. The country’s highest every import of ca. 2.8 million tonnes of petroleum products were recorded in 2024 .
More than 90% of the imported oil products are from Russia and the remainder from countries such as China, Republic of Korea and others. To reduce its dependence on imports, the Government of Mongolia has commenced construction of the country’s own refinery, supported by a 1.24 billion USD soft credit line from India. The refinery with an initial capacity of 1.5 million tonnes p.a. is being built in Altanshiree Soum near Sainshand City in Umnugovi Aimag. The oil refinery is expected to be commissioned in 2027. Furthermore, the construction of a 530 km oil pipeline which will transport crude oil from oilfields in eastern Mongolia to the refinery commenced in 2023 and its completion is scheduled in 2025.
Laws and Regulations
The Petroleum Law of Mongolia was adopted on 18 January 1991. The law was last revised in 2014 providing clear and transparent legal environment and creating more favourable conditions for investors. The law regulates the operations of Mongolian and foreign entities or individuals on exploration, production, transportation, storage and marketing of petroleum in Mongolia.
The MRPAM is the government agency overseeing the implementation of the Petroleum Law of Mongolia and relevant regulations.
Sources: Mineral Resources and Petroleum Authority of Mongolia, Mongolia Extractive Industries Transparency Initiative, Ministry of Industry and Mineral Resources of Mongolia, Mongol Refinery State-Owned LLC.
Last updated 15 May 2025.